Download - Stmkt auc-class.9-10-spring.2013
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Generic Strategy
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Porter’s Generic Strategies
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Exercise: Which is which??..
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1. McDonalds.
2. GAD
3. KFC
4. Burger King
5. AmrHamdy designs kitchens
6. GW Marriott
7. Metro market
8. Canary fast food
9. Kiosk in your street
Competitive Strategy
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Identify the potential competitors
Analyze the competitor’s Objectives
Determine the competitor’s Strategies
Analyze the competitor’s SWOT
Identify the competitor’s:
- Share of Market
- Share of Mind
- Share of Heart
How to analyze the competitors?
Which competitor to compete with?
Strong Weak
Good Bad
indirect Direct Coke Pepsi Tap
water
Ferrari
Branded
Products
Counterfeit X
Chevrolet Ford
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Competitor Map
Competitors & Market Dominance
Market Leader
Market Challenger
Market Follower
Market Nichers
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Market Leader
It’s the dominant company in the market with
the largest Market Share.
It leads the price changes, promotional
intensity & Distribution Coverage Ex.: Boeing (airliners), Nestle (food). Microsoft
(software), L'Oreal (cosmetics), Royal Dutch/Shell
(oil). McDonald's (fast food) and De Beer (diamonds).
Market Leader
Market Pioneer is the first company introduced a
certain product to the market.
Market leader must be Market pioneer to protect
its market share.
Motorola was the market Pioneer & Leader as well in
cell phone industry ..but Nokia& Ericsson were
pioneers so that they became market leaders
Coca Cola was the Market pioneer & Leader
establishing a positioning that it’s the original .. but
Pepsi positioned itself as a choice of new generation
thus became the market leader
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Objectives & Strategies of
Market Leader
A. Expanding total market, through: 1. More Usage/consumption
The dominant company will gain the most when the consumers increase the quantity or frequency of consumption.
Ex.: Heinz will gain more profits if the American consumers increase their consumption of Ketchup.
How to increase the Usage/Consumption??.. Ex.: larger packages have been shown to increase the
amount of product consumed at one time.
Ex.: increase the availability of the product will increase its consumption esp. soft drinks, snacks
Ex.: tie the product to a certain occasion Nescafe at morning, Coke & football matchs
A. Expanding total market, through:
2. New Customers
The dominant company will gain the most when the no. of
consumers increases even if some of them are buying
competitive brands.
How to attract new customers??..
Market penetration Growth Strategy, by: more ads,
discounts, promotional campaigns..etc
Market development Growth Strategy, by: targeting new
segment, target new geographical market
Product development Growth Strategy, by adding new
features that will encourage more customers to buy it
Objectives & Strategies of
Market Leader
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A. Expanding total market, through: 2. New uses
The dominant company will gain the most when discovering and promoting new uses for the product.
Ex.: Nylon is an example of new-use expansion. Every time nylon became
a mature product, some new use appeared. Nylon was first used as a fiber for parachutes; then for women's socks ; later as a leading material in shirts; and in vehicle tires ..etc
Arm & Hammer baking soda the company discovered that consumers were using baking soda as a refrigerator deodorizer. It launched a heavy advertising and publicity campaign focusing on this use and persuaded consumers to place an open box of baking soda in their refrigerators and to replace it every few months.
Objectives & Strategies of
Market Leader
B. Defending market share, through:
1. Position defense (Fortification strategy)
The dominant company must defend its current position
esp. in the consumer’s mind in order to minimize the
threat of being attracted to the competitor (attacker)
Ex.:
Pampers & Dryness,
BMW & Performance,
Coke & The Original,
Pepsi & New generation choice.
Objectives & Strategies of
Market Leader
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B. Defending market share, through:
1. Position defense (Fortification strategy)
The dominant company must defend its current
position by offering premium performance & superior
value through anticipative & creative marketers.
Ex.:
Shell must constantly guard against BP,
Gillette against Bic;
Kodak against Fuji;
Boeing against Airbus
Objectives & Strategies of
Market Leader
B. Defending market share, through:
1. Position defense (Fortification strategy)
The dominant company must keep diversifying its
business portfolio in order to protect its position in the
market.
Ex.:
Coca-Cola in spite of being the world leader in soft drinks, is
aggressively extending its beverage lines (related
diversification) and has diversified into equipment and
plastics (unrelated diversification).
Objectives & Strategies of
Market Leader
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B. Defending market share, through:
2. Flank defense
The dominant company must improve its weaknesses
to avoid threats or being attacked through these points
or to add more advantages even by diversifying its
business portfolio.
Ex.: after launching “Range Rover”, land-Rover company
became under attack by Japanese & US Companies which
launched similar cars but with lower prices. Therefore,
Land-Rover improved the engine of Range Rover to justify
the high price targeting high-end market and launched
“Discovery” with lower price to target low-end market.
Objectives & Strategies of
Market Leader
B. Defending market share, through:
3. Pre-emptive defense
The dominant company must start to attack before
being attacked by the challengers
Ex.:
when being threatened in the mid-1980s by the impending
entry of Japanese manufacturers into the US market,
Cummins Engine slashed its prices by almost a third to
save its no. 1 position in the $2 billion heavy-duty truck
engine market. Today, no single US-built tractor-trailer truck
contains a Japanese engine.
Objectives & Strategies of
Market Leader
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B. Defending market share, through:
4. Counter-offensive defense
The dominant company will respond to any attack by
counterattack action
This strategy will be very successful if the competitor is
vulnerable.
Ex.:
When Fuji attacked Kodak in the film market, Kodak
counterattacked by dramatically increasing its promotion and
introducing several innovative new film products which pushed
fuji to go again to its main interest.
Objectives & Strategies of
Market Leader
B. Defending market share, through: 4. Counter-offensive defense (con’t)
Mars' attack on the ice-cream market, using its brand extensions of Mars Bars, Snickers, Bounty and so on, created a new product class of ice-confectionery. Unilever's Walls ice-cream division, which is market leader in parts of Europe, had difficulty countering this because it had no confectionery brands to use in that way. It overcame the problem by developing brand extensions of Cadbury's products, a competitor of Mars, which has no ice-cream interests. In other parts of Europe, Nestle is leader in the ice-cream market. With its strength in both confectionery and ice cream, it was able to launch brand extensions to match Mars.
Objectives & Strategies of
Market Leader
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B. Defending market share, through:
4. Counter-offensive defense (con’t)
Xerox attacked IBM in mainframe computers, then IBM counterattacked by producing lower price photocopier to compete with Xerox bread and butter copiers with a leasing option which attracted a lot of customers and pushed Xerox to sell its mainframe computer business unit to honeywell to focus on protecting its copier business unit
Objectives & Strategies of
Market Leader
B. Defending market share, through:
5. mobile defense
The dominant company must have a flexible
response capability thus The leader can stretch into
new markets and from the current product to the
broader underlying consumer need. EX.: Armstrong Cork redefined its focus from 'floor covering'
to 'decorative room covering' (including walls and ceilings)
Philip Morris faced growing curbs on cigarette smoking, they
moved quickly into new consumer products industries, by
buying General Foods and Kraft to become the world's largest
consumer packaged goods company.
Objectives & Strategies of
Market Leader
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B. Defending market share, through: 5. mobile defense (cont’)
This strategy is depending on 2 pillars (R&D) & external environment analysis.
Ex.: Persil has a leadership in UK soap powder market due to the constant attempts to keep the product in line with changing customer requirements.
However, Persil went to far twice, first, by product development to be with “biological formula” which made Persil market-driving company all competitors started to imitate although this feature had been proved later to be weakness since it caused skin irritation for some customers.
Second, by another product development trial by adding magnesium accelerator which damaged clothes and every time Persil original formula was back again.
Objectives & Strategies of
Market Leader
B. Defending market share, through:
6. Contraction defense (strategic withdrawal)
The dominant company sometimes prefer to give
up weak market to reduce overstretching and
allow concentration on the core business.
The company will serve fewer markets, but serve
them much better. Ex.: McDonald’s –Egypt started to produce “falafel” to
attract new segments but failed. So it phased out that
SBUand went back again to its main interest “burger “.
Virgin will face dramatic failure if its management board
continues its extensive unrelated diversification strategy
Objectives & Strategies of
Market Leader
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C. Expanding market share, through:
1. Win competitor’s customers
The dominant company can eat from the
competitor’s market share by offering Sales
promotions and price reductions but such gains
may disappear once the promotion ends.
Exceptions to this are price fights stimulated by
market leaders with more resources than
competitors. Ex.: Pampers & kiddy, caudles..etc
Objectives & Strategies of
Market Leader
C. Expanding market share, through:
2. Win competitor
The dominant company may find it easier to buy
competitors rather than win their customers.
Moreover, this action may take the company into
new field Ex.: BMW's purchase of the Rover Group with its small cars
and cross-country vehicles.
Nestle intends to hold its position as the world's leading
food company, although DANONE also intends to be.
Both have been acquiring businesses, Nestle buying Perrier
and Rowntree among others, while DANONE own Jacobs,
Kronenbourg, Amora, Lee & Perrins and IIP sauce
Objectives & Strategies of
Market Leader
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C. Expanding market share, through:
3. Win loyalty
The dominant company will benefit from
customers loyalty and this will definitely increase
its market share positively. Ex.: In the UK grocery market Tesco challenged and
overtook Sainsbury's as the market leader by introducing a
hugely popular loyalty scheme while Sainsbury's was
resisting this trend
Objectives & Strategies of
Market Leader
Market Challenger
A runner-up firm in an industry that is fighting
hard to increase its market share.
They can attack the leader and other
competitors in an aggressive way.
Ex.: Colgate, Fiat, Toyota, Roche, Sandoz,
HSBC, Carlsberg and PepsiCo.
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Market Challenger
To succeed with such an attack, a company
must have some sustainable competitive
advantage over the leader, a cost advantage
leading to lower prices or the ability to
provide better value at a premium price. Ex.: Komatsu successfully challenged Caterpillar by
offering the same quality at much lower prices, Glaxo
became Europe's leading drug company by
aggressively marketing its 1st product Zantac.
To gain market share from:
Market leader Xerox overtook 3M in the copy market then Canon overtook
Xerox later
Company of its own size Any company which is underfinanced or not satisfying the
customers’ needs well.
Smaller or weaker companies Most Banks are growing up by acquiring smaller ones.
Objectives of Market Challenger
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1. Frontal Attack
The challenger matches the competitor's product,
advertising, price and distribution efforts. It attacks
the competitor's strengths rather than its
weaknesses.
IBM & Apple
Vodafone & Mobinil
Unilever & P&G
Market Challenger Strategies
2. Flanking attack
Rather than attacking head on, the challenger can
concentrates its resources to attack the
competitor’s weak spots. Flank attacks make
good sense when the company has fewer
resources than the competitor Ex.: Airbus challenged Boeing a company that dominates
the industry by developing the A300 with range and
payload performance different from Boeing's
established 727, 737 and 747 range.
Market Challenger Strategies
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2. Flanking attack Another flanking strategy is to find unserved
segments or new geographical areas to fill them in with its products and develop them into strong segments.
Ex.: European & Japanese car makers do not try to compete with American car makers by producing large forms Instead they recognized an unserved consumer segment that wanted small, fuel-efficient cars and moved to fill this hole.
Coca cola is dominating Soft drink market except some eastern & Asian areas where Pepsi dominates.
Market Challenger Strategies
3. Encirclement attack
It involves attacking from all directions even by isolating
the competitor from the supply of its raw material
and/or the customer they serve.
The encirclement strategy makes sense when the
challenger has superior resources to produce better
products that can break the competitor quickly.
Ex.: For several years, Seiko has been gaining distribution in
every big watch outlet and overwhelming competitors with its
variety of constantly changing models. In most markets Seiko
offers about 400 models, but its marketing strength is backed by
the 2,300 models it makes and sells worldwide.
Market Challenger Strategies
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4. Bypass attack
is an indirect strategy. The challenger bypasses the
competitor by diversifying into unrelated products,
or moving into new geographic markets or into new
technologies to replace existing products.
Ex.: Technological leapfrogging is a bypass strategy
used often in high-technology industries. Instead of
copying the competitor's product and mounting a costly
frontal attack, the challenger patiently develops the next
technology. When satisfied with its superiority, it
launches an attack where it has an advantage.
Market Challenger Strategies
5. Guerrilla attack
The challenger typically makes small, periodic attacks to
harass the competitor, hoping eventually to establish
permanent footholds.
It might use selective price cuts, novel products, executive
raids, intense promotional outbursts or assorted legal actions
Ex.: When entrepreneur F.Laker frontally attacked the established
airlines (TWA) by offering cheap transatlantic flights, they fought
back and bankrupted him. Now TWA has all but disappeared and
British Airways is facing Virgin Atlantic run by a much wilier
entrepreneur. Richard Branson. He makes guerrilla attacks on his
much larger competitors..
Normally, guerrilla actions are by smaller firms against larger ones.
Market Challenger Strategies
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Market Follower Strategies
Product imitation might be as profitable as
product innovation.
Many companies prefer to follow rather than
challenge the market leader.
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Follower Strategies
Counterfeiter - duplicates product
Cloner - slight variations
Eg Addidas in Abbidas & Addidos
Imitator - differentiation in packaging,
advertising, pricing, location
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Objectives of the Nicher:
1. Creating niches
2. Expanding niches
3. Protecting niches
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Nicher Strategies
Small firms target small markets that are of
little/no interest to large firms
Create, expand & protect niches
Offer high value, premium price, low
production costs.
Multiple niches increases chance of survival
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Why is Niching Profitable?
The main reason is that the market nicher
ends up knowing the target customers so
well that it meets their needs better than
other firms selling to this niche.
The nicher achieves high margin, while, the
mass marketer achieves higher volume.
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